Although the former Justice Minister is giving the money to charity, the Taoiseach and other former cabinet colleagues had earlier indicated that they expected him to forego the payment.

Fine Gael TDs are reeling after his decision to call a large media briefing, at which he was effectively seen as defying his party, less than 17 hours before voting began in the local and European elections.

The party's candidates fear that his latest controversial move will damage their prospects.

The Dublin South TD kept the Taoiseach in the dark about what he was going to do even though Mr Kenny had earlier said that he expected Mr Shatter to hand the money back to the Exchequer.

Senior Fine Gael sources said the severance pay fiasco left a bad taste with many in the party.

"At the end of the day it's taxpayers' money," a source said.

"He voted for the legislation to end severance pay just like everyone else, so he should have stood by that principle."

Mr Shatter raised expectations of a dramatic announcement when he indicated early yesterday that he would be issuing a statement on the plinth outside Leinster House at 2.30pm.

The timing guaranteed maximum exposure as the moratorium on broadcast media discussing today's elections kicked in at 2pm.

As the Taoiseach, Tanaiste and other former cabinet colleagues had suggested earlier this week that they expected Mr Shatter to "do the honorable thing" in relation to the €70,000 payoff, it was not expected that the former Justice Minister would accept the money.

His choice of the Jack & Jill Foundation as the charity to which he would donate the money was seen as significant as it has been a vocal critic of the Government in recent months over the latest medical cards controversy .

After Mr Shatter's announcement, the Taoiseach said: "My preference would have been if the matter had been signed off.

"It's now done and I do hope that the children who are in the care of the foundation of Jack and Jill will benefit from the transfer."

Earlier, Mr Kenny, who stood by the Dublin South TD through months of scandals involving the Department of Justice, had said that he expected Mr Shatter "to do the right thing".

Fianna Fail justice spokesman Niall Collins said Mr Shatter's decision was a sign that Mr Kenny is "fast losing control and credibility".

He added: "There's a strong irony in Mr Shatter's decision to defy his party colleagues, keep his severance payment and gift the money to the very charity that has taken a central role in the campaign against his Government's medical card cuts."

The Government passed legislation banning the controversial ministerial severance payments but it had not been enacted when Mr Shatter was forced to resign three weeks ago over his handling of allegations of garda misconduct made by whistleblower Sgt Maurice McCabe.

Mr Shatter called a press conference outside Leinster House where he announced his intention to take the payment and give it to a charity of his choice.

He said he called Jack and Jill Foundation CEO Jonathan Irwin on Wednesday evening to tell him he would be gifting the money to the charity.

The severance package will net the charity around €50,000 after taxes are applied. If Mr Shatter had kept the money, he would have been left with €34,000 after tax.

Asked if he had told Mr Kenny about his decision to keep the money, Mr Shatter said: "No, the Taoiseach, I think, will now be learning of it."

Yesterday morning, Mr Kenny said he spoke with his former minister in recent days about issues of national importance. However, he did not say if they had discussed the former minister's severance payment.

After Mr Shatter's announcement at 2.30pm, Mr Kenny addressed the issue while he was out canvassing in Mullingar.

The Taoiseach pointed out that Mr Shatter did not benefit from the entitlement and said it was his money under law.